Govt should drop power, gas tariff hike plan: Prof Mahmud

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FE Report
Noted economist Wahiduddin Mahmud said Wednesday the government should refrain itself from hiking further the power and gas tariffs in view of the ongoing global financial hurricane.
"I think they (government) should consider dropping its plan to spike power and gas prices," he said.
Professor Mahmud said that any move to hike the prices of gas and electricity would hurt the local industries, as the world's top economies, including the United States, are having an extremely difficult time.
His comments came at a time when the interim government is considering a hike in gas and electricity tariffs intended to cutback on state loses sustained over years.
He was addressing as chief guest at a seminar on global financial crisis: impact on Bangladesh, organised by the Economic Reporters' Forum (ERF) at the National Press Club.
He also said the government should assist the industries right this time, otherwise the economy might experience a slowdown following the current economic turbulence in the western economies.
He favoured providing subsidies to help local exporters cope with the looming crisis, regardless of what would be implications for the next budget.
"I think, the government should not think what subsidy they will offer in the next budget. Did the western governments think their next budgets before the announcement of multi-billion-dollar worth bailout plans to salvage their financial institutions?," he said.
ERF president Nazmul Ahsan was moderator at the programme while renowned economist Ananya Raihan and Shah M Ahsan Habib jointly presented keynote paper on the issue.
Prof Mahmud, a former caretaker adviser, said the central bank needs to take step to discourage the use of credit cards on a large scale.
"The extensive use of credit cards in western countries is blamed for the ongoing economic recession. So, we have to take a good lesson from it," he observed.
"In our country, the credit card illusion is also on the rise. So, the central bank should enact new rules to regulate its use," he said.
As local banks are not linked with embattled global financial institutions, Prof Wahid said, they would remain largely immune from the turmoil, but this should serve as a lesson for them.
Prof Mahmud, who chaired a banking reform committee in the 1990s, does not favour injection of fresh capital into the inefficient public sector banking system, saying the move would go against the interest of the taxpayers.
"In the past, we re-capitalised state-owned banks-at least three to four times. This would be 'injustice' if we repeat it this time," he said.
Turning to the country's stock market, he said the global financial meltdown is unlikely to effect the local stock market.
"There is no risk for the capital markets. If there is one, it would be psychological," he said.
Prof Mahmud said some western nations have started bringing changes in their immigration rules after the emergence of the deeper economic crisis-a worrying sign. This could affect the remittance flow by expatriate workers, he added.
Mustafizur Rahman, who heads non-government Centre for Policy Dialogue, said the ongoing global economic tsunami could undergo three phases, with the first one lasting five to six months; the second one lasting year to two years and the third three years to five years.
Speaking at the seminar, Ibrahim Khaled, a former Bangladesh Bank governor, said Bangladesh could gain if the global financial hurricane lasts no longer than a period of one year.
If the crisis is short, Mr Khaled said, "It may lead to lower inflation. And because of the crisis affecting the investment climate in developed countries, laundered money may even find its way back to Bangladesh."
"If such money comes back, the authorities should consider relaxing investment rules," said the former central banker.
BGMEA president Anowar-Alam Chowdhurty Parvez said the government should explore the possibility of devaluation of local currency against the greenback to give a boost to the country's exports.
"India, Pakistan and even Vietnam have taken steps in the wake of global financial crisis. But we are yet to take any measures--neither any financial package nor devaluation of Taka," he said.